Palm Desert, CA asked in Business Law for California

Q: Is it legal to have a contract where my company only pays someone after the company makes a certain amount of profit?

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3 Lawyer Answers
Shawn R. Jackson Esq.
Shawn R. Jackson Esq.
Answered
  • Rohnert Park, CA
  • Licensed in California

A: As a general rule, you can place most contingencies as a pre-condition to payment ... so long as it is reasonable and objective in nature. The issues for you will be "acting in good faith" and "with fiduciary care" in developing that "certain amount of profit". You MAY have placed more burdens on yourself ... depending upon the actual language in the agreement. The next step is for us to schedule an initial free consultation by video call or telephone call ... and/or with the attorney of your choice ... your thoughts?

Robert Philip Cogan
Robert Philip Cogan
Answered
  • San Diego, CA
  • Licensed in California

A: Maybe. Your question does not say what the contract is about or how the deal works. "Profit" can have many meanings. Ten CPAs can give you 10 different calculations of profit and every one of them will be legitimate. An attorney can set up the deal so that you and the other side have the same understanding of what profit means. Otherwise you are setting up a situation where there is a greater chance for a dispute.

Disputes cost money and they do not get the job done.

Julie King
Julie King
Answered
  • Monterey, CA
  • Licensed in California

A: Yes. Two people can enter into a contract to do anything so long as it is legal. But both sides need to willingly agree. If both sides agree to the terms you proposed, that should be fine. Best wishes.

Brian Scott Winkler agrees with this answer

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